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[SEOUL] South Korean shares dropped to a two-week low early on Friday as reports came in that China had ordered tour operators to stop selling trips into the country, amid rising tensions over the deployment of a US missile-defence system.

China has expressed anger over South Korea's moves to deploy the missile system, which Seoul and Washington say is designed to thwart the threat of attack from nuclear-armed North Korea, but which Beijing says is targeted at China.

Seoul and Washington agreed in July on the deployment of the US Terminal High Altitude Area Defence (Thaad) system.

The Korea Composite Stock Price Index (Kospi) was down 1.2 per cent at 2,077.26 points as of 0233 GMT, its lowest since Feb 17.

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"Shares of the companies that are linked to this issue, such as cosmetics and tourism, are reacting sensitively, pressuring the whole index," said Bae Sung-young, a stock analyst at Hyundai Securities.

Amorepacific Corp fell as much as 7.8 per cent to its lowest since early February of 2015, marking the biggest intraday percentage loss since Oct 25, 2016.

Shares of Hotel Shilla, a hotel and duty-free retail unit of the Samsung Group, also tumbled as much as 13 per cent.

Decliners far outnumbered advancers by 676 to 133 on the bourse.

The downward trend of shares in related sectors is likely to continue as long as the Thaad issue remains unresolved, though a sudden drop in the main bourse from this issue alone will be unlikely, Bae said.

The South Korean won slipped 1 per cent to its lowest in nearly three weeks on growing expectations the US Federal Reserve would hike interest rates in March, and ahead of a speech by Fed Chair Janet Yellen later in the global day.

The won was quoted at 1,154.0 against the US dollar, down 1.1 per cent compared with Thursday's close of 1,141.6. It was the lowest intraday level since Feb 13.